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Sensex Extends Gains To Day 4, Nifty Reclaims 9,900

Indian equity benchmarks extended gains to fourth day led by gains in energy and pharma shares.

The S&P BSE Sensex rose 0.55 percent to 31,671.71 and the NSE Nifty 50 Index advanced 0.56 percent to 9,915.

Fourteen out of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Healthcare Index's 1.8 percent gain. On the flipside, the S&P BSE Telecom Index was the top sectoral loser, down 0.5 percent.

  • Indian equity benchmarks extended gains after the Reserve Bank of India kept the key rates unchanged as expected
  • The S&P BSE Sensex rose 0.8 percent to 31,752 and NSE Nifty 50 index advanced 0.8 percent to 9,938
  • Rate sensitive shares like banking, auto and realty shares witnessed buying interest post the policy announcement

Banks Extend Gains

  • Decision on the expected line
  • Present weakness in economy is more a supply side problem and solving it through monetary framework will not be much useful

India’s monetary policy committee (MPC) voted to keep interest rates unchanged and maintained a neutral stance, suggesting that any further rate cuts are not a given.

The central bank slashed its growth outlook for the current year, but raised its inflation forecast marginally. (Here’s a full analysis of the credit policy)

Key Highlights

  • MPC keeps repo rate unchanged at 6 percent.
  • MPC maintains neutral policy stance.
  • The decision was taken by a 5-1 vote with Ravindra Dholakia voting in favour or a rate cut.

Monetary Policy Report: On Growth

  • Real gross value added (GVA) growth forecast at 6.7 percent in FY18 compared to 7.3 percent earlier
  • Real GVA growth may rebound to 7.4 percent in FY19
  • Economic activity is expected to recover with an improvement expected in the services sector
  • Services sector to counter balance persistent weakness in industrial production
  • Consumer confidence dipped in the September 2017 round of RBI’s survey

Monetary Policy Report: On Inflation

  • CPI inflation expected to pick up to 4.2 percent in Q3 FY18 and 4.6 percent in Q4 FY18
  • Inflation is expected to pick up from recent lows due to adverse base effect and increased house rent allowance
  • Broad based rebound in various underlying measures of inflation in April-July period
  • GST rate structure could have an impact of upto 10 basis points on CPI inflation

Monetary Policy Report: On Fiscal Deficit

  • Upside risks to fiscal deficit from possible measures to boost domestic demand and from lower revenues
  • A 50 basis point expansion in fiscal deficit in FY18 could push up inflation by 25 basis points above baseline scenario

Monetary Policy Report: On Output Gap

  • Output gap has remained mostly negative over the last two years
  • Subdued credit growth has contributed negatively to demand conditions
  • Space for policy cuts is limited
  • Cutting rate right now does not help solving the core issue
  • As per our house view chances of rate cut going forward are pretty low
  • Downward revision in growth is because of supply side issues such as demonetisation and GST roll out
  • RBI commentary will be neutral to dovish as global growth has improved and India's growth has fallen

Shares of interest rate sensitive sectors such as banking, auto and real estate companies were trading marginally higher ahead of the Reserve Bank of India's monetary policy decision outcome.

The Nifty Bank Index was up 0.1 percent, Nifty Auto index advanced 0.2 percent and the Nifty Realty index rose 0.4 percent.

  • Thyrocare Technologies: The Mumbai-based diagnostic laboratories operator fell as much as 1.6 percent, the most since September 25, to Rs 667.20. Trading volume was 27.1 times its 20-day average.
  • SJVN: The Shimla-based power generation company rose as much as 6.5 percent, the most in over three months, to Rs 35.8. Trading volume was 21.8 times its 20-day average.
  • Gujarat Narmada Valley Fertilizers: The Gujarat-based fertilizer maker jumped as much as 10.6 percent, the most in nearly one year, to Rs 359. Trading volume was 10.4 times its 20-day average.
  • 8K Miles Software: The Chennai-based software developer advanced as much as 20 percent, the most in over seven years, to Rs 453. Trading volume was 9.4 times its 20-day average.

Shares of the Pune-based real estate developer rose as much as 18.4 percent, the most since March 29, to Rs 214.50. Trading volume was 2.8 times its 20-day average.

Shares of the country's largest cigarette maker jumped as much as 2.4 percent, the most in over a month, to Rs 267.70 after brokerage house CLSA upgraded the stock to 'Buy' from 'Underperform' on modest earnings outlook.

Shares of the specialty chemical company jumped as much as 9.1 percent, the most since July 4, to Rs 273.

Shares of the Delhi-based construction company jumped as much as 6 percent, the most since September 28, to Rs 319.80 after it won orders worth Rs 555.7 crore.

Key order highlights:

  • Order worth Rs 555.77 crore for construction of institutional and residential building.
  • Order worth Rs 255 crore for construction of redevelopment pool of residential colony at Mohammadpur in New Delhi
  • Order worth Rs 173 crore for construction of Bennett University at Greater Noida

Shares of the Mumbai-based dairy products maker jumped as much as 5 percent, the most since August 14, to Rs 136 after the company said that it is targeting Rs 2,000 crore revenue by the financial year 2019-20, by enhancing its consumer segment to 50 per cent of the total business.

Rupee rose 0.3 percent to 65.32 against the U.S. dollar tracking dollar weakness ahead of the Reserve Bank of India's decision on repo rates due later in the day.

  • Indian equity benchmark indices rose to intrday highs
  • The S&P Sensex rose over 150 points to 31,650 and the NSE Nifty 50 Index advanced 48 points to 9,907
  • Pharma and energy shares were leading the gains in trade so far
  • Rate sensitive stocks were also witnessing buying ahead of RBI monetary policy review
  • From the Nifty 50 basket of shares, 36 were advancing while 14 were declining
  • Broader markets trade in-line with the benchmark indices with BSE MidCap and SmallCap Indices up 0.6 and 0.8 percent each respectively

Shares of the state-run oil marketing companies jumped after the government cut the excise duty on petrol and diesel by Rs 2 per litre as it looks to cushion the impact of rising crude prices.

  • Indian Oil rose as much as 3 percent to Rs 419.
  • Bharat Petroleum advanced 3.2 percent to Rs 494
  • Hindustan Petroleum gained 3.8 percent to Rs 451

Shares of the Hyderabad-based drugmaker jumped as much as 20 percent, the most in over nine years, to Rs 954.35 after its partner Mylan got approval from the U.S. FDA to sell generic version of multiple sclerosis drug Copaxone in the American market.

Mylan got the approval for selling both 20 mg and 40 mg strengths, it said in a press release, adding that it may be eligible for 180-day exclusivity for the 40 mg version as it is the first patent filer for the drug.

Indian equity benchmarks were little changed with rate sensitive stocks trading on a muted note ahead of the Reserve Bank of India's monetary policy decision.

The S&P BSE Sensex was little changed at 31,469 and the NSE Nifty 50 Index was also little changed at 9,856.

Ten out 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Oil & Gas Index's 0.9 percent gain. On the other hand, the S&P BSE Telecom Index was the top sectoral loser, down 0.4 percent.

  • We are at bottom of rates and we may see a raise in rates in Q1FY19
  • By Q4FY18 inflation will be higher compared to RBI's own projections
  • Interest rate hike will be negative for NBFCs
  • MHCV growth was stronger than market was expecting
  • Like Maruti Suzuki and Hero MotoCorp from large cap space
  • Market is expensive but not at a peak
  • Not seeing high teen earnings growth as of now
  • Next upmove for markets to be driven by improved earnings visibility
  • Have been positive on auto sector
  • Do not like anything in IT sector as industry is going through a transition
  • Nifty October Futures trading with a premium of 8.9 points versus 12 points at 9859.5
  • October Futures: Nifty open interest up 4 percent, Bank Nifty open interest rose 2 percent
  • India VIX closed lower by 0.2 percent at 12.46
  • October series highest Call base at 10,000 (open interest at 46.5 lakh shares, down 4 percent)
  • October series highest Put base at 9700 (open interest at 39.7 lakh, up 13 percent)
  • October call strikes 9,700, 9,800, 10,000 saw unwinding
  • October put strikes 9,700, 9,800 and 9,900 saw open interest addition
  • Godrej Agrovet’s IPO opens today with a price band of Rs 450-460. The company allotted 7.42 million shares to anchor investors ahead of the IPO.
  • General Insurance Corporation IPO opens Oct 11, ends Oct 13
  • Hatsun Agro Products: SBI Mutual Fund bought 10.50 lakh shares (or 0.69 percent equity) at Rs 700 each

ICICIdirect on Ratnamani Metals & Tubes

  • Initiates Buy rating with price target of Rs 1,050
  • Ratnamani perfectly positioned to cater upcoming demand
  • Capex revival in key industries to provide requisite demand push
  • Strong multi-year order-book of Rs 2,100 crore provides strong revenue visibility
  • Expect revenue, EBITDA and net profit to grow at a CAGR of 14.5 percent, 15.6 percent and 17.3 percent respectively over FY17-20

CS on Pharma

  • Prefers Sun Pharma over Dr. Reddy’s Labs
  • Price erosion risk lower in Sun Pharma vs Dr. Reddy’s
  • Long-term story stronger for Sun Pharma with more advanced specialty portfolio in the U.S.
  • FDA risk higher for Dr. Reddy’s with potential import alert at Duvvada plant
  • Sun gets higher proportion of profits from India, thus more earning stability

Brokerages on Coal India

  • Morgan Stanley: Maintains Underweight with price target of Rs 221. Low base continues to support. strong volume growth; Balance of FY18, expect 6.5 percent CAGR on a two-year basis.
  • Nomura: Maintains Neutral with price target of Rs 260. Re-stocking surge by power plants drive volumes; For FY18 expect production/offtake at 572/580 MT implying 3.2 percent/6.8 percent growth.

Macquarie on HDFC

  • Maintains Outperform with price target of Rs 1,890
  • HDFC Asset Management Company valued at 5.2 percent trailing AAUM vs Reliance Mutual Fund valued at 8-10 percent of trailing AAUM
  • Monetisation could raise HDFC’s valuation by Rs 44 a share
  • HDFC AMC has 13 percent market share

Nomura on Adani Ports & SEZ

  • Maintains Reduce; hiked price target to Rs 319 from Rs 234
  • Raise earnings estimates by 11-13 percent over FY18-19 to factor in better traffic growth and lower debt
  • Return on equity to fall due fall in margins and higher tax burden
  • Mundra volume growth to be driven by 15 percent CAGR in containers over FY17-20
  • Revenue and net profit to grow at CAGR of 16 percent and 3 percent over FY17-20; margins to be around 11-12 percent
  • Poor free cash flow generation to continue in the near-term
  • Hero MotoCorp September sales cross 7 lakh mark
  • Apollo Tyres institutional shares sale to raise Rs 1,200 crore with a greenshoe option of Rs 300 crore opens
  • Mahanagar Gas raises CNG, PNG prices in Mumbai by nearly 4 percent
  • Ricoh India says NCLT rejected FDS’ petition under the Bankruptcy Code
  • Indian Overseas Bank revises savings bank interest rate by 50 basis points
  • Info Edge India: Zomato waives reservation fees from restaurants
  • Cyient signed an in-software licensing pact with Elpis Squared
  • Ahluwalia Contracts bagged construction and re-development orders worth Rs 555.77 crore
  • Greaves Cotton partnered with Altigreen Propulsion Labs to deliver clean energy solutions
  • Mandhana Industries says NCLT, Mumbai bench initiated insolvency proceedings against the company
  • Bombay Rayon Fashions to allot 1.93 crore shares to State Bank under S4A scheme
  • L&T Infotech clarifies that the $100 million contract from CBDT was received in July, 2016
  • Majesco launched version 10 of the Majesco P&C Suite

For a complete list of stocks to watch, click here

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, was little changed at 9,882.

The rally in the dollar petered out as investors awaited President Donald Trump’s decision on the leadership of the Federal Reserve and gauged prospects for U.S. tax cuts. Bonds edged higher and Asian stocks were mixed after American indexes closed at record highs.

Back home, market participants will watch out for Reserve Bank of India's monetary policy decision which will come later in the day.

A survey of economists conducted by Bloomberg News showed the RBI is expected to hold the repurchase rate at 6 percent until end-2017. A separate survey forecast India’s growth at 6.8 percent in 2018, down from 7.3 percent earlier.

Commodities

  • Gold rose 0.3 percent to $1,275.07 an ounce.
  • West Texas Intermediate crude dropped 0.8 percent to $50.03 a barrel.

. Read more on Markets by BloombergQuint.